Running head: Current and Non-Current Assets Current and Non-Current Assets University of Phoenix ACC400 Debra Latimore Introduction Starting a business calls for the acquisition of assets which help the business in its growing process. Assets are material or non-material resources of value owned or controlled by the company which was acquired at a measurable cost (Solution Matrix, 2004). There are two main specific types of assets: current assets and non-current assets, both of these are utilized for profit generating and/or service provision.
Company management and stockholders expect that assets Justify their existence by producing returns” (Solution Matrix, 2004). Current and Non-Current assets are different and unique from one another, each providing a given value to the company. Current Assets Current assets are short term assets which include cash and other assets that can be converted into cash in the near future, these include accounts receivable and finished goods inventory (Solution Matrix, 2004). Some short-term investments included in current assets include bonds, stocks, and certificates of deposit.
Current assets make up an important fgure in the businesses balance sheet and listed in order of liquidity. Liquidity refers to the expectation that the item can be converted to cash in at least close to its current value within one year (Main, 2008). Assets are listed in descending order of liquidity, with cash at the top of the list of assets. All this information is put on the top portion of the balance sheet which is the financial statement that lists assets, liabilities, and equity of a company in order to calculate the net worth of the business.
Non-Current Assets Non-Current assets as opposed to current assets are long-term assets. These assets include fixed assets and intangible assets. Fixed assets are all those tangible equipment, material or property that a business owns and uses to generate income, that are not expected to be liquidated or sold before the one year duration (Natashagils, 2010). Intangible assets are very similar to fixed assets and are assets which a company/business plans to use for longer than a year to generate income.
When it comes to reporting such assets in the balance sheet these would be separate rom the current assets, depending on the business they can be reported in a category called “Property, Plant, and Equipment” (Solution Matrix, 2004). Similarities and Differences between Current and Non-Current The evaluation of assets, their worth, and the amount of profit they are adding to the company is something that all businesses must be well aware of and maintain between current and non-current assets in order to determine an evaluation as mentioned above.
The main difference between current and non-current assets is that current assets are planned to be sold or consumed in or before a time period of ne year. Non-current assets on the other hand are intended to be used over a longer period of one year. Current assets generate profit for the business and non- current assets have a very low impact on profitability. Examples of Current assets include bank balances, cash inventory, and raw material; examples of non-current assets include equipment, machinery, and plant (Natashagils, 2010).
Even though current and non-current assets are different and unique from one another, they too were purchased or owned by a business for profit generating or nvestment opportunities (Natashagils, 2010). Organizations main goal is to make a profit or open doors to opportunities. Buying distinct assets, no matter what kind of asset, and using it towards the company’s better use is something that every business is intended to do.
Both current and non-current assets are tangible and intangible economic resources that are managed and controlled to promote a profit for the business. Also these two assets are both listed in the balance sheet of a company to give the companies total net worth. Conclusion The accounting department is very demanding for distinction and organization within every detail of cash going in or out of the company. Identifying and understanding the companies assets will help understand one of the many areas of the accounting department.